Abstract

The purpose of the study is to examine the influence of internal control
function and corporate governance structures (major shareholders, independent
commissioners and audit committee) on audit fees. Based on the agency theory,
the separation between ownership and controlfunctions in organization leads to
conflict ofinterests between them. So, the controlfunctions (internal control and
corporate governance) are expected to be counter-balance towaratconflict of
interests by external auditing.
This study is replication of Hay's et al. research in 2008 and uses
secondary datafrom annual reports ofmanufacturing companies which listed on
Bursa Efek Indonesia in 2005-2007. This study uses purposive sampling method
and uses multiple linear regression as the analysis instrument. Before being
conducted the regression test, it is examined by using the classical assumption
tests.
The results show that internal auditfunctions have missing correlation on
auditfees andaudit committee negatively related to auditfees. The two corporate
governance structures (major shareholders andindependent commissioners) have
significant positive relationship on auditfees. The results consistent with previous
studies and consistent with the explanation that controls are complementary
(controls, corporate governance and auditing are complement), an increase in
one control will lead to an increase in the others.
Keywords : Corporate governance, internal control, auditfees.